We are still in startup stage, but I'd like to prepare myself for future growth. I know that some businesses fail due to lack of preparation when the spotlight hits them. What steps can I take to prepare my business to ride the wave (and leverage the wave) efficiently and successfully if we were to receive sudden high-volume traffic and sales?
Co-Founder & CEO, RESTore Silk
For starters, you have the right attitude: confidence in your product and response from your markets. However, it is correct to assume that proper preparation is necessary for your firm to weather any expected or unexpected turbulence in sales volume. A sound strategy, backed by a workable business plan, will help mitigate risks and help you deal with any surprises.
From your question, the principal risk you believe you have is not meeting high demand. The easy way to address this is to contract with supply-chain partners. They will be prepared to help you react positively to upward spikes in sales.
Another option is to build your inventory so that it would meet the top-side of your projections. However, this has the potential for complications and is where mitigation of risk comes into play. What if sales are slower than anticipated or your supply chain is unresponsive?
To help avoid a situation where you are left with a glut of product, there are a number of standard steps you, or any startup, should take.
First, talk with your customer base through market research. Clearly articulate the expected risks, look for tactical feedback and build contingency plans. Second, identify bottlenecks in your supply chain and prepare ways to overcome them. Third, operating expenses may grow larger than expected. Sudden high-volume sales will put stress on your employees and demand adjustments in marketing tactics. Be ready to control those variables. Fourth, manage cash flow and use that to manage growth. Be cautious not to overcommit resources in light of an initial sales spike. Look to being in this for the long-term.
About the author
Jack Militello is a professor of management at the University of St. Thomas Opus College of Business.